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tv   Street Signs  CNBC  February 6, 2013 2:00pm-3:00pm EST

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>> he has famously said that but isn't his son on the board? he is left a lot of money -- i mean, these kids, maybe not billions. >> well, they are not flipping burgers. his kids have inherited millions. you know, even bill gates, said, i won't leave my kids -- but even some is -- >> good problems to have and one problem i will probably not ever have. sue, may we all have to worry about such things. >> i was just thinking the same thing, ty. my kids will have to work for a living too. anyway, dow jones industrial average down 32 point now and s&p 500 off about four. but still above the 1500 mark which is wyou it watch.
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that the key technical level and nasdaq is down 10.5 points on the trading session. ty, we are holding at key levels. down by the 13,000 level mark. everyone is watching the -- >> you were saying, as you were saying before you left to go into the city today, this is sort of a classic consolidation process, not a sell-off, per se. >> exactly. and it is kind of bullish for the market if we can hold the key technical levels, ty. >> thanks for watching, everybody. >> have a great afternoon. "street signs" begin right now. ty and i will be back tomorrow. welcome to "street signs." today we begin with a question for you. which school tech name has the best year. four names you know, only one can win. we want you to play as well. herb, finally. get to work. he has dug out the companies
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jacking up dividends the most and how they are doing might just surprise you. plus, what the rest of congress may actually be able to learn from the post office. yeah. and we take another "street signs" look at jc penney and whether that company is finally doing it right, mandy. >> hello, everybody. take profits. at least that's what we have been doing. we did go briefly positive and if we do that again by the close, we may have the first two-day winning streak for the dow and s&p in about two weeks. don't let that get you down. because the s&p is still up about 6% year to date and half of the s&p 500 components have hit new 52-week highs so far this year. those are, i think, some pretty good stats. let's get straight down to bob pisani. bob, what are people talking about down there? what is main theme of the trading day? >> you notice we got into february. we have 70 points moving the dow. since february, we are basically flat. two problems. we are in february. number two, guidance is on the
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choppy side. particularly the global guidance. look at u.s. gypsum. play on housing recovery. great comment. our results, strongest we have seen in over three years. continuing to see signs. housing recovery. wait a minute, take a look at the stock. to the down side. problem here, they have another business. ceiling tiles. you the tiles you see in your offices? that is very poor. commercial business very uneven. stocks down a little bit. big truck engine maker. big global truck engine maker. this is what they said. uncertainty surrounding turn and pace of improvement in end markets in 2013. these guys, 60% of revenues outside the united states. good global indicator. the stock moved up but it is standing right near the top its range right now. that is the problem, mandy. we still don't have a lot of certainty on what 2013 is going to look like. that may be a problem for stocks in february. mandy? >> okay. bob pisani, thank you very much
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for laying it out for us. >> mandy, as our viewers know. many big time tech tight yoons have taken a beating over the last couple of years. dell will be extinct as a public company. are we in for return of one or more of the so-called jurasic texts? so here is the set up and our question to you, loyal viewer, nokia. betting big on the new line of lumia phones. 41 mega pixel camera coming out this summer. microsoft getting great reviews. blackberry has a new name and new line with the blackberry 10. at hp, reports they are at least talking about potentially breaking the company up. so we are asking, which of those four names will post the best stock returns this year and we are talking about on the long side, folks. don't say you will short them down to nothing. joining us now, josh brown and
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jeff killburn. both cnbc contributors. all right, josh, you famously went long in the stocks draft. you almost won the dog gone thing and had a great come back. >> i should have won. i should have. >> be nice to reggie, he had a nice call. are you saying of the four, that company formerly known as blackberry be of those four names, is the one to have the biggest year of 2014. >> with tech companies i prefer younger more exciting ones. but out of this group, if i had to pick the one that could be the most surprising come back, i would pick the worsed positioned just for the sake of this discussion. so i would have to say it's nokia. there is no worse position company right now than nokia. they have a wonderful sense of the north american market for smart phones which is technically nonexistent. however there are things in the works that might change that. that is the one that's most interesting to me.
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as a spec, i would not put news out into the retirement. >> and the camera with lumia range, is it a camera company or phone company. >> here is the exciting news about nokia. they are sick and tired of apple shenanigans. where you see at&t sell too many phones so earnings contract, that tells you there is an issue in terms of subsidies. nokia lumi a is a better deal fr them. so whether or not it works is a different discussion. but i think there are catalysts with nokia. and right now, you have a company with a net cash position of 5 billion, so it is not going anywhere. and nobody expects anything with it. that's what happened with wynn last year. that's a spec play. >> okay, josh, should have won. what about you, what do you
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think you are backing. >> well, i don't like to go against josh or mark cuban. but i like hewlett-packard. subsequently, wrote up 8.8 billion. i like the position this is falling from grace and right now they are like the t rex out there. they got their swagger back. they are talking smack on the streets. maybe eat up dell customers. i think hewlett-packard, just under 17. looking for pull back down to 15. the way do get long for 2013. >> it is interesting, jsh, because of nokia -- i have an iphone, i have used the phone extensively, i was given a demo of the nokia and i say it is the best of the phones. once you get used to the tiles, fantastic phones. but do you think think can pull it off? they are coming from an element nonexistent market share. >> just here, just in north
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america, around the world a pretty big entity. here is is the wild card in the nokia situation -- microsoft has a lot at stake to prove they matter in mobile. the launch of the surface is not going to get the job done. but they do have a royalty red share agreement with nokia whereby the company promotes each other's product. so nokia's lumia will run on the new microsoft mobile. microsoft has more money than they know what to do with. $67 billion. they couldn't spend it if they tried. but they can use that as a platform to help nokia gain ground. >> or, josh, let me throw something out there. and this is me speaking, not people reporting, this is whatever. the man who runs nokia, former microsoft executive, friend of steve ballmer. we know microsoft sniffed around rim. do you think there is a chance that they do more than partner up? you think microsoft could make a move for nokia to buy?
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>> i guess anything could happen. i wouldn't go into the stock expecting that to happen. what i would do is say okay, of all my speculative money i have to work with, i think nokia is here. i would work with the stop at like three bucks. i wouldn't take more than 25% risk. i think if it heads below 3, something major could be wrong. >> right. >> and perfect timing for this segment. we just flashed up a moment ago the fact that blackberry has the best ever for blackberry in canada yesterday. i want it pose, and i'm also kind of stealing your thunder because it is one of your 2013 predecks and a speculative prediction about maybe oracle making a play. what do you reckon, jeff? >> well, acquiring companies the last 24 months, i wouldn't play that out of the realm, mandy.
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remember a couple years ago, at 50, $50, and they got very compelling and just to lay out a case against nokia. remember they got dethrone. they used to be number one in the world. now samsung, did they lose their mojo? >> yes, they lost their mojo. $4 stock. $60 years ago. we don't need to answer that question in 2013. question is which of these companies could shock everyone? i think you have to look at the one that has the least hope. in hewlett-packard wab quick word of caution. even if they split the company up. now two have of things that people don't want. no one want the pc bids or printer and toner cartridge business. >> it is a very spirited discussion. we will have you both back on soon and dissect hp, is it a flop or is there something to it?
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we have to go. breaking news out of d.c. pt president announcing his pick for interior secretary. if you are concerned about mineral, gas, mining, this is a big one. now to d.c. >> president naming sally jewel, executive president of rei, as next interior secretary to replace ken salizar who stepped down, former senator from colorado. if you are a democratic president you want the most bulletproof nominee can you have. this is somebody who is a ceo currently. she worked for mobile oil in the past. so she has a little bit of armor to take on those oil and gas companies which have big policy disagreements with the president. the president is also taking flak from the left. a former interior secretary under president clinton. bruce babbitt criticize sidesed the administration for giving in too much to industry. the president has a balancing act but he believes under sally jewel has reputation for ceo who is a noted conservationist.
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he thinks he struck the right balance. >> and criticses that say obama didn't have enough women. >> that's right, mandy. >> a major storm brewing on the anniversary of another monster blizzard. a whole lot of snow apparently heading to the northeast. we will give you your updated storm tracker next. >> rain nor sleet nor hail will stop the post office from delivering your mail. at least for now. post office said so long to saturday service. i say, don't panic, everything is fine. >> and tim geithner writing a book. what would you title it? again, sweeping the interweb, ahead. at a dry cleaner, we replaced people with a machine.
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what? customers didn't like it. so why do banks do it? hello? hello?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello? ally bank. money needs an ally.
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neither snow nor rain can stop your mailman, unless it's the weekend. because the postmaster general announcing today the post office will stop saturday delivery in august. a move that he says is desperately needed. >> a typical large organization would have either cash on hand or quick borrowing ability. two months worth of cash to cover their operating costs. in october, the postal service had less than four days of cash on hand. that's very scary situation. that is no situation a business should be in. >> so how does this affect u.s. business, if at all. let's bring in president of
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government affairs, jerry, you guys are pretty powerful. are you going to officially oppose it? >> no, we won't officially oppose it. some of our members applaud this move. others do not. i think every member has to make some adjustment due to it. but the postal service is losing $25 million a day and they have to make moves to cut costs in order to stay relevant. >> who doesn't think this is a good idea? who exactly will be negatively affected by this, jerry? >> i think advertisers are trying to advertise a sale for the weekend. and they wanted mail delivered for that sale on saturday. newspapers, delivered through the male that are delivered on saturday will be harmed. and some weekly publications that want in home delivery on saturday, and delivery on monday would make them irrelevant. they will have to make major,
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major changes to the loss of saturday delivery. >> what would you like to see them do, jerry? how can the u.s. postal service get back to running a 21st century organization? >> they do have to right side their network. right now designed to deliver 250 billion pieces of mail and it has it shrink to delivering 120 billion pieces of mail. that has to be done. relook at service standards. if you need some delivery immediately for physical paper, you have next day delivery with express mail and what ups and fedex offer. and you have electronic delivery. so they have toe do that. i think you look at deliver days and the fact they are keeping partial delivery we applied
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applaud delivery and i think that is a major plus in making that adjustment. >> i also believe the post offices are open will remain open on saturday even if letter mail is not delivered. thank you so much and i just want it add brian when i heard about this and maybe some people might be outraged, we never have weekend saturday, sunday mail delivery in australia. >> that's because kangaroos refuse to work the week ends. >> they do, they need to rest their hoppers. apart from christmas, we have never had it. when i tweet out twitter-verse, they say, thank goodness i won't get bills on saturday and maybe one less day of junk mail. there you go. leave it to herb to do the work for you. the link between, i believe, herb and dividend payouts and
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stock performance. what have you found? >> dividend increases. with all these companies with so much cash burning a hole in their pockets. in many cases they are very big. just yesterday, harley-davidson announcing 35% increase. day before, master card out with a hundred percent increase. these are, you know, a little bit -- these are very important. but do they matter? going through s&p 500 to find out, the conclusion, let us take a look. here are the biggest dividends, biggest gains, over the past six months. you had nrg energy, 200 percent increase, 200%, seeing nasdaq, and 200% up. starwood hotels up 10.8%. which gets to the next big dividend, small gains. take a look at american tower. 109% increase. 5% gain in the stock price.
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saic, 3.5%. limited brands up 2.3% and by the way, s&p 500 over that period of time up 8% or thereabouts. here is where it gets interesting and you get the big dividend yields. how the stocks with the biggest yields in s&p 500 doing? look at that. pitney bowes which some people say it is a company like watching ice melt. look, down 2.9%. limited brands in there again. 10.5% yield. 2.3%. and windstream, you can see the trend. >> the hog a moment ago, harley-davidson, coming out with an increase in dividend, generally companies like hog, how do they do the day after? like 24 hours later after an announcement -- >> today the stock is up, what, about a half a percentage point. that is across the board. when you look at it wlb it is the first day or you go through
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the whole list, you know, it is a case by case situation. and it is some of the companies you have to remember that the dividend may have been priced in. so people were expecting it and price actually wasn't as big after boost as had been expected. >> very big stuff on dividends. i know we will get ourselves heaping hub today. >> can you believe that? yes, i am. >> i'm coming back just for you. >> a greenburg buffet. >> i don't know if that is a good or bad thing. >> great thing. >> all you can eat for $19.95. an exclusive interview with jcp interview. an interview with courtney. is the long-awaited turn around finally here? >> and the stock soaring this year. it it is a bank you probably never heard of and one of or stock-picking guests just loves it. it is called a tease, so we're not going to give you the name now. you have to stick around. the wing and a fractured beak.o
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35 years ago, the blizzard of '78 slams new england and the tri-state area. the catastrophic storm dumped upwards of three feet of snow in 33 hours. forecasting models were not as accurate back then. as you can imagine, a lot of people went on about their business, the day the storm started, trapping thousands of people on i-95. look at incredible footage. >> people today stop their disco dancing and fuand kung fu fightg to dig their cars out. a new major storm is brewing in the north thaest could dump upward of two feet of snow in some parts. paul good low is here with the updated track. paul? >> hey, guys. the good news is, it is happening on the weekend. bad news is, as you said, we can see perhaps two feet of snow in parts of the northeast and new england including you in boston as well.
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take a look at the he is hascen. a clipper, barreling across the great lakes, both meeting up right here across areas of the northeast and new england and bring you plenty of snow as well. time this out by friday, the snow begins. friday night, heavy snow across the area. new york city just on that line. maybe seeing 1 to 3 out towards suburbs. easily 3 to 6 inches of snow. but wind is coming in. so whatever does fall, blowing around there as well. on saturday, snow continues back here across the northeast. so does the wind and boston. we get this all day long, friday night into your saturday. how much are we talking about? a large area being over a foot. does include you in boston. basically a line from hartford to springfield, boston northeast ward. can you see heavier snow and perhaps more snow than we have seen in the boston area in more than ten years.
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>> paul goodloe, thank you very much. still waiting for the good news. i guess here it is. just revealed from the young president's organization survey of more than 2,000 ceos worldwide. however, will that bump-up in confidence mean a bump-up in spending and the economy? joining us is a member of our chief executive network. alan, it is nice when people answer things on surveys that they are more positive. will they do anything because of it? >> oh, absolutely, brian. you are seeing balanced opt miss frem ceos. this is a survey that's done. every quarter, we have had 15 quarters of survey results. there are three times as many ceos thinking the economy will do better over the next 15 months, versus the number who think it will worsen. it is telling you that the cloud of uncertainty is starting it fall apart.
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as the fiscal cliff was avoided, there is some uncertainty but things or on the margin are improving. >> does this attract economic gain? thz it is interesting. it is too early to call it a definitive indicator but if you track the survey, it is remarkable. there is a six-month lag between confidence move and ultimate move in the u.s. gdp. but every time confidence kicks up, the u.s. gdp growth kicks up. there is a definitive measure but certainly worth watching. >> we will see it in july and we are tracking higher. alan zafran, thank you very much. >> thank you. >> a the higher cost pushing down margins, but the stock is soaring? >> that's a good riddle. and why boeing dreamliner crisis has america's airports in a holding pattern. that's a very special report next.
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i have never looked better. superderivatives introduces dgx. data done differently. this is the one we teased. a stock is higher, looks like two things.
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number one, short cover and cmg and one tag raising a target to 375. how come? because they believe chipotle will raise prices, be more aggressive in marketing and add more stars in states like california, texas and florida. >> and we have time warner cable as well. pushing a stock the highest since when? march 2002? >> yeah, 11 years ago. stock is up another 4%. raising their dividends. full year guidance is in line and they bought 84 million shares for $3.5 billion. that stock is up 41%. >> yesterday we gave our viewers the look ahead for earnings. today we give you the look back. >> bullish call we talk about. >> yeah. >> looking pretty good today. zynga up 9.5%. >> wall street expecting loss. sales higher than analysts expected. however, do note they do see a wider loss for the current quarter, so clearly, at least
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some part of this move is short covering in zynga today. >> what is on with take two? apparently video games aren't dead. soarings ending expectations and also the surprise of 7.5 million share buy back authorization and raising the target from 17 to 15. and your company, sony, may finally launch their play station four on february 20th. >> okay. then a stock that is small and making big gains. its name is conceptus. >> that's why we like this stock. folks, we do this ourselves. never heard of this company. 7% today. beatingernings by 6 cents. who are they? they make a nonsurgical permanent birth control. method. so actually, reached out to the ceo today. see if he will come on and talk about the company. find these under-the-radar names. >> in the meantime, we have herb
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at take two. welcome to take two. >> this is the herb entree. >> you have been watching headlines on, what other than, multilevel marketing space. what have you dug up? >> it is a mouthful today. a new skin has a new weight management business. it is expected to drive significant growth in the back half of the year. i have to point something out, though. that is herbalife's business, which is weight management. is this sustainable in this glutted weight management product after distributors make their first purchases which cause the big gain. then a company called usana. they announce price initiatives and they say it requires patience by investors. that's not what you want to see from multilevel marketing company. and then we have way from multilevel, keep an eye on brookefield asset management.
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i keep hearing in the weeds things about accounting. a lot of chatter on that. today i'm told a lot of put buying today on that company. finally, clean harbor. the company relied on the sec filing last night to say its cfo of around six months is out the door. vice chairman and president will resume his old job as cfo keeping other two titles. guys, no formal press release. that, my friends, not a good sign. >> red flag for you, right? >> one of many. >> thank you, herb. >> we will swap out herb. but we will see you later for dessert. next, phil lebeau -- compliments of the chef. >> compliments of the chef. >> you are rotating people in and out. >> a palate clanser.
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>> at a breakfast, listen to what the chairman said about the state of the investigation into the dreamliner and dreamliner batteries. >> we are working with boeing and faa. they have parallel activity going on. so i will tell you, we are going to have information tomorrow. but i think we are probably weeks away, and tell people here is what exactly happened and what needs to change. >> weeks away from figuring out exactly what is going on with the dreamliner. and this is not good news for four cities. san jose, san diego, denver and houston. why is it not good? they all have direct service. either started or scheduled to start. let's start first with san jose. it is estimated that the cost to the region is $214,000 a day in lost business as long as ana is not making that flight. next, san diego. japan, nonstop to narita. discount landing rates, if they
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don't have that flight, they are not happy. nor are they happy in denver. at end of march, they are supposed to have direct service to tokyo in march. this is real money that potentially they will lose if they have to delay the service. finally, united starting dreamliner service tonight jeera, and london heathrow. >> the news has a bit after dip at around 10, 10:30. but it has come back since then. on the 17th, the grounding started. look at stock now. trading higher now than when it started. ultimately jim cramer said this time and again. people are going to want to find out definitively what will happen in terms of production. once that happens, then we will have a better sense of how the stock reacts. until then, this has been a teflon stock. >> quick, quick question. will any of the cities try to quell back the financial losses.
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>> oh, you bet they will. maybe not the city as much as the airline. >> oh, they have suggested they will. >> that is all part of negotiation. it happens all the time. not just with this plane but for all planes. >> they also got a discount for faking on the new plane. >> right. but the agreement is when the service starts, it starts. it doesn't start then stop. >> thank you very much. a mixed market for the metals today. sharon checking the winners for us and maybe even some losers. hi, sharon. >> hi, mandy. we are where we started at the beginning of year for gold. platinum serving $200 this year. and highest levels since september 2011. real gains where people are putting their money is in the plat yum and palladium. we see growth positive from u.s. and china. add to that, tight supplies.
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keep your eye on the auto sector and we will see perhaps an even greater one in platinum in weeks to come. >> sharon, thank you. on deck, stock, one investor loves. bank, booming, and you probably never heard of it. >> and $9 for a loaf of bread and $15 for a pack of smokes? we will take you to the world's most expensive cities. don't forget to tweet us what you think. and time geithner titles his new book. how do traders using technical analysis streamline their process? at fidelity, we do it by merging two tools into one. combining your customized charts with leading-edge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points.
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can you give us a name that is meet willing all of your criteria right now? >> i wrote a stock for a couple weeks ago, aquan financial, ocn. it is breaking out new highs today and cheaper than apple. >> you heard the name here first on street signs. today we are diving deeper in ocwen financials. they have a market capital of more than $5.5 million and has been on a tear. henry, you have this stock here. rate it as a buy.
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gunnederson, bill gunnederson says it has valuation, performance. do you believe it has all three? >> i believe so very much. it's been a a great stock for us for the last couple of years. and you know, to chime in on bill's comment that they keep delivering earnings over and over again, the stock keeps getting cheaper and cheaper. >> what are the risks? >> i think the biggest risk is two things. it is a business in transformation. so you are waiting for all of the servicing to board, which they have acquired in the last few months, then you are waiting and watching the next six months to see what earnings they can deliver and the dramatic uptick as you take a company earning about 37 cents a share and a year later it is earning north of a dollar a share per quarter. and so that's a big change. that you have to sort of wait quietly while think affect that transformation. >> everything is cued up to get it done. >> my question is more simple.
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who the heck is ocwen financial? how did they get this big? where did they come from? >> ocwen financial has been around 25 years or more. they are a special service meaning they look at difficult to service and sub prime assets. they have been doing that for over two and a half decades. >> i guess my point is, henry, i've been doing this now for 16 years, not to say i know every company, but i've never heard of them. they are buying goldman sachs servicing, maybe allied bank. are they getting new backing, new management? >> no, the same team that's been together for 25 years. it's just that everything has come their way. and they built this amazing platform in india that does this better and chapper theaper than else in the business. >> all right. henry, thanks for coming on. when people have a warehouse, they don't want to
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buy it, but usually lease it and left someone else do the heavy lifting. someone like pro logis. hi, jane. >> prologis is an industrial read. and joining me from san francisco, yes, a nontech company joining us from california. thank you for joining us. >> thank you. >> you beat in the fourth quarter and the metric people use, you have record lease with 94% occupancy. a new project from amazon. but shares are down today as guidance from 2013 was lower than the street expected. why is that? >> two reasons. first of all, you've got to look back to the 2008. a lot of the leases that were signed at the peak of the market are now expiring. some of those rent are rolling down lower. but starting in 2009, we are planning leases at the bottom of the market. so we think that situation will reverse itself going forward.
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in is it sort of the last of the low rents for market. secondly as far as what shares do day in and day out, your guess is as good as mine but i can tell you that the company has done very well in the last 12 months. and almost any period you look at. >> you are expecting inventory under the u.s. and finally this year surpass the previous peak. you say a lot of your growth is due to housing recovery. what does housing have to do with big warehouses. >> that's a great question. if you look at our portfolio and we own $48 million worth of real estate around the world. if you look at a really large building, we are a hundred percent leased. if you look at smaller buildings under a hundred thousand feet, we are only 90% leased. that is a sweet spot of the housing market. your supplier of count are tops,
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appliance person, all of those guys, and gals, lease smaller buildings. so as housing market comes back, you know, if we get into the million, million two type of starts, we will see a surge in that segment of the market and normally the cycle, we're about 95% leased. so when that sector comes back, i think our occupancies will continue to increase. >> finally, you are raising money in this japanese rate and joint venture in europe. you say china turned a corner. you're leasing in spain, of all places. a hundred person occupancy in brazil. is the rest of the world growing fast than the u.s.? and which area is the most lucrative for you? >> yes, the rest of the world is growing faster than the u.s. with the exception of japan and europe, obviously. but emerging markets are growing very fast from a very small base. so china, zra bra zil, mexico are doing extremely well. i would put them at the top
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tier. but surprisingly, growth is positive. we had the absorption in europe. it is the strongest we've seen in four or five years. >> chairman and ceo of prologis, thank you for joining us. >> thank you, jane, as well. we have been asking you to tweet us what you think tim geithner should title his book. thank you, everyone, who treated. treasury island. never let them see you sweat. >> we loved this so much, we are throwing it into our group here. it pains me to say this. the guy is an aussie. he is a writer for the wall street journal. here comes money boo boo. >> brilliant. >> we do have some wits down under. >> here is a sneak peek.
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>> you better red neck-onize.
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j.c. penney feeling a little pain today down about 3%. in an exclusive interview on cnbc, the company ceo says the worst is behind them, and this year they will return to growth. courtney reagan sat down with the man himself, ron johnson earlier on today, and she joins us now. what did he say. >> reporter: exactly right. a couple hours ago i sat down with ron johnson, j.c. penney ceo, right here at a store in dallas, texas. it's been a tough year and he talked pretty candidly about that, but he says that 2013 is the career that j.c. penney will return to growth. >> as we approach this career the number one priority is to return to growth. it's also the number two priority. it's the number three priority. we want to return to growth, and we think the key to that is communicating value, and we'll do that in whatever way it takes to rush to growth, but it all is rooted in the first price being the right price. >> now, investors are certainly
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hoping for the shedding of $5 billion in market cap in the first year of transformation. the salons in jcp locations and at headquarters. when we asked ron johnson about the layoffs, he said he won't comment specifically but did refer to the layoffs as rumor. there's concern about cash. is that how these rumors surfaced. johnson says he doesn't spend a lot of time worried about cash or liquidity. however, investors will find out how much cash is on the balance sheet to start year two when we find out the earnings in a couple of weeks. now, the sales have been reintroduced to j.c. penney, a reversal of the previous strategy when johnson said, quote, the sale is no longer in our vocabulary. j.c. penney still on track to open 30 shops this year. and with that's sales, some analysts have been concerned that adding everyday low prices, plus a sale on top of it, event
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driven and incremental to compromise hitting the gross margin target by 2013 but ron johnson is sure they will get there. >> let's bring in our guests and herb greenberg is back with us as well. when i hear a ceo say he's not worried about cash and liquidity, think maybe he's not worried about it because it's not a problem, or should he be worried about it? >> i certainly think he should be worried about it. >> yeah, me, too. we -- i think he said something very interesting in the interview today when he was asked if this turnaround is self-funding. first he said yes and then he said we won't have to tap into the revolver this year, and he qualified it, and i think by the end of 2013 they will have to tap into the revolver, and if their sales are off, if they don't start to improve, they
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could get to that 90% rate of baroing against that -- against that that would trip a covenant that they would have to have a fixed charge coverage ratio which they are below right now. >> it could be critical. do you beg to differ? >> i think if they don't have sales turnaround it could be a problem. they are going to have a sales turnaround. they will have positive comps in the third quarter. the 30 shops they are putting in are going to work. the business is already getting better in the stores. i was in three stores yesterday. sales are getting better in the stores. we're going to see that drive in the third and fourth quarter and we won't have a cash problem. >> herb? >> well, no, i'm intrigued with this. >> sounds very confident. >> this is a level -- you're a i go who is very bearish on this, down on the entire concept. you said you would buy the stock at $18 or thereabouts, and now you're -- you're out there and telling us it is going to basically turn around, so i'm thinking here thinking, gee, where do you think the stock is going? >> i actually said i would buy it at $17. that was close enough, and i
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said it would be a double at 34 this year if sales turned around in the back half, and i think they will. rick and i were both totally negative on them this time last year. he's still negative down to ten. i said at 17 i was going positive and i think they will run to 34. >> rick, i'm sure you like and respect jan, used to run a department store, smart guy, but you guys are polar opposites now on the stock. what are you seeing? >> here's my question for jan. jan, you and i were both in the stores. did you see anybody shopping in those shops? i didn't. i saw people shopping the middle of the store, an here's the question. why when they start putting these shops in, the shops that are going to turn around the whole company, did comps get worse and not better? >> here's the good news. just yesterday there were lines to check out at willowbrook mall, palisades and garden state plaza. first time i've seen, it busier than pre-christmas. you could have set a bomb off in
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the stores pre-christmas and not heard anybody at penny's. starting to see tracks conn. >> has rick been to stores where he is? >> i see a lot of people shopping markdowns. jan, do you think it's a coincidence they send off a $10 off for any $10 purchase and they started to get traffic? i don't. >> no, i think the coincidence is you and i went to the same college, but what i really think is not a coincidence is that they have gone back to doing things that will drive traffic. yes. i don't care if it's a coupon. i don't care if it's a sale for valentine's day. they are not going back to 590 promotions per year, but they are going back to driving some traffic, and the stores look beautiful. the shops are beautiful. if the next 30 look as good, and they can drive some traffic, which is what they have got to do with these promotions, i think they will be a winner in the back half. >> baby steps, baby steps. rick, jan, courtney and herb, thank you all very much. >> thank you. >> and still ahead, a $9 loaf of
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bread. we'll take you inside the world's most expensive city next. [ male announcer] surprise -- you're having triplets. [ babies crying ] surprise -- your house was built on an ancient burial ground. [ ghosts moaning ] surprise -- your car needs a new transmission. [ coyote howls ] how about no more surprises? now you can get all the online trading tools you need without any surprise fees. ♪ it's not rocket science. it's just common sense. from td ameritrade.
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